A federal district court in South Carolina recently granted motions to bifurcate a trial involving various claims, crossclaims, and counterclaims between an insured, reinsurers, and a reinsurance agreement trustee. Companion Property and Casualty Insurance Co. (“Companion”) was the beneficiary of a reinsurance collateral trust for which U.S. Bank served as a trustee. Under the trust agreement, the reinsurers could direct U.S. Bank to substitute assets according to certain specifications with appropriate notification to Companion. Alexander Burns founded a number of corporate entities (“Southport”) which acquired the relevant reinsurance companies and therefore managed the trust’s asset allocation strategies through appropriate direction to U.S. Bank.
The lawsuit filed by Companion against U.S. Bank alleges certain trust investments violated the terms of the trust agreement. U.S. Bank subsequently asserted counterclaims against Companion as well as claimed that Burns and Southport (“third-party defendants”) were the cause of any alleged injuries. Companion and Burns filed separate motions requesting the Court bifurcate the trial: one proceeding to adjudicate the claims between Companion and U.S. Bank and a second proceeding to adjudicate the third-party claims if Companion were to prevail in the first proceeding.
Ultimately, the Court granted both motions for separate trials after finding that bifurcation would serve the “objectives of promoting convenience and achieving an expeditious and economical resolution” to the various claims asserted by the parties. It noted that cases involving third-party claims are particularly suitable for bifurcation given that resolution of the primary claims may obviate the need for trial of third-party claims, such as contribution or indemnification, and also reduce the amount of discovery needed overall.
Because the adjudication of U.S. Bank’s third-party claims is contingent upon Companion prevailing in its primary claims, trying the primary claims first would either eliminate the need for trial of the third-party claims, or alternatively, encourage settlement negotiations between U.S. Bank and the third-party defendants. Additionally, bifurcation in complicated cases such as this one involving multiple claims, crossclaims, and counterclaims, can avoid prejudice stemming from jury confusion from being presented contingent and contradictory claims simultaneously. The Court acknowledged the slight risk of inefficiency should U.S. Bank be required to litigate two separate trials which might include some overlapping evidence, but concluded that the efficiency gains outweighed that risk and granted the motions.
Companion Prop. and Cas. Ins. Co. v. U.S. Bank National Assn., Case No. 15-1300 (USDC D.S.C. Aug. 23, 2017).
This post written by Thaddeus Ewald .
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